Although American equities got off to a rough start, markets soon rebounded and finished Monday trading on a much higher note. The tech-heavy Nasdaq led the big three, gaining 0.6% on the day while the S&P 500 rose by 0.5% and the Dow added 0.4%. These gains were largely fueled by solid performances out of the basic materials sector, although some strength in the big names in tech and health care contributed as well. Commodities, which had struggled mightily last week, bounced back to start this week as gold rose by about $21/oz. and oil surged higher, gaining close to $6/bbl. to finish just over the $103 mark. Other energy commodities were among the biggest gainers on the day as well as RBOB gasoline gained just under 7% and heating oil surged by 4.8% on the day. Grains also rebounded while silver, which lost roughly 25% of its value last week, led all major commodity products higher, adding an impressive 7.4% on the session and greatly cutting into last week’s heavy losses. “The hard bounce in gold, silver and oil has spilled over to their associated equities in a relief rally,” said Elliot Spar, market strategist at Stifel Nicolaus & Co.
One of the biggest winners in the ETFdb 60 was the PowerShares DB Commodity Index Fund (DBC), which gained 3.7% on the day. Today’s sharp gains came thanks to a large spike in price for a variety of oil products and other energy related commodities, goods that are among the biggest components of DBC. Many traders were enticed by the market’s sharp sell-off last week in which crude lost about 15% of its value in a matter of days, potentially creating a bargain buying opportunity for some willing to wade through some short term volatility. In total, heating oil, Brent crude, WTI crude, and RBOB combine to make up roughly 50% of DBC’s total assets and since those four products averaged a gain of roughly 6%, it is safe to say that these contracts helped to carry the fund to a strong performance today, and more than evened out the returns that some of the other commodities in the fund– namely the soft commodities– produced during Monday trading [see fundamentals of DBC here].
One of the biggest losers on the day was the United States Natural Gas Fund (UNG), which sank by 1.9% despite broad strength in the energy sector. Today’s losses for the volatile fuel came as traders bet on mild weather curbing demand throughout the country, allowing the fuel to potentially add to its current stockpile level of 1.757 trillion cubic feet. Prices for the popular fuel weren’t helped by a report from Baker Hughes which showed that the number of rigs drilling for gas in the U.S. increased by eight to 890, the most since the beginning of April. “As prices crept higher this year, you’ve seen rig counts come back up,” said Carl Neill, an energy consultant at Risk Management Inc. in Atlanta. “Coming into 2011, the expectation was that we’d start to see a decrease in rigs.” Thanks to this ceiling on the price of natural gas, UNG has a had a rough series of trading days and was once again down during today’s session [see charts of UNG here].
Disclosure: No positions at time of writing.